Dairy commodity prices drove the Global Dairy Trade index up 0.8% at last night’s auction.

Every category except milk fat products lifted with whole milk powder up 1.5% and skim milk powder up 2.2%.

Eighty-nine percent of the total 43,497t available was sold.

The rise in SMP prices, to US$2809/t, takes them to their highest average price on the platform in the past 12 months. 

NZX dairy analyst Rosalind Crickett said in a note that factoring market sentiment, the increased demand for both milk powders at GDT 364 is not surprising – given the off-peak of milk production in the northern hemisphere combined with factors such as the bluetongue virus, which has been increasing in prominence in both the United Kingdom and Europe.

Looking at milk fats, AMF eased 1.2% overnight to settle at US$7220/t – its first change of direction after four consecutive increases at GDT Events since July. Butter also softened 1.7% to reach an average price of US$6546/t.

Among other products, cheddar rose 2.9% to reach its second highest price in the last 12 months of US$4441/t. 

Mozzarella continues to know no limits, seeing further 4.5% increase in prices to US$5351/t. Lactose also saw a 3.5% increase this time, after a heavy decline at GDT 363, settling at US$896/t.

North Asia maintained its top purchasing spot for both milk powders and butter at GDT 364 – accounting for 51% of the total product volumes. Southeast Asia/Oceania was the top buyer of AMF, while Africa was for cheddar.

For the first time since late 2021, farmer confidence in the broader agri economy is back at net positive levels, the latest Rabobank Rural Confidence Survey has found. 

Following a small dip in the June quarter, the latest survey found farmer confidence in the broader agri economy had increased to +3% from -25% previously. 

Completed in early September, the survey found the number of farmers expecting the performance of the broader agri economy to improve in the year ahead had doubled since last quarter to 30%, while the number expecting conditions to worsen had fallen to 27% from 40%. The remaining 41% of farmers expected conditions to stay the same. 

Rabobank CEO Todd Charteris said the arrival of spring had brought with it a lift in primary producer sentiment, with farmers across all sector groupings now more upbeat about the year ahead. 

“Across the previous 10 surveys, pessimism has been the dominant sentiment, so it is really encouraging to see net confidence on the up and back in net positive territory – even if only just, with more farmers positive than negative about the 12 months ahead.” 

Higher commodity pricing and falling interest rates were cited by farmers as the two major reasons for expecting conditions to improve.

Since the last survey in June, global dairy prices have continued to trend upwards with this culminating in Fonterra lifting its milk price forecast by 50 cents to a mid-point of $8.50kg/MS in late August, he said.

“We’ve also seen prices for beef continue to soar, while sheepmeat prices have inched upwards as the new season approaches. 

“In addition, farmers have been buoyed by the RBNZ’s decision to lower the Official Cash Rate by 25 basis points in August. And with further rate cuts expected over the months ahead, we’ve seen bank interest rates fall significantly across recent months.” 

Among farmers holding a pessimistic view of the 12 months ahead, the survey found that for 48%, rising input prices continue to be the major source of concern. 

The survey found farmers’ expectations for their own farm business operations were up across the board.

As with the broader agri economy, farmers are now much more upbeat about the prospects for their own businesses, with the net reading on this measure lifting to +18% from -1% previously, Charteris said.

 “Each of the major sector groupings – dairy, sheep and beef, and horticulture – recorded net positive readings, and we have to go all the way back to Quarter 3 in 2021 for the last time this happened.” 

Dairy farmers and sheep and beef farmers are now much more optimistic about their own businesses than they were in June.

“Dairy farmers are now the most optimistic of all the sector groupings with 42% now expecting the performance of their own business to improve in the next 12 months and less than one in 10 expecting it to worsen,” he said. 

There was also a strong lift from sheep and beef farmers on this measure, up to a net reading of +6% from -17%, while growers recorded a more modest 2% lift to +29%.

The percentage of farmers self-assessing their own operations as “unviable” was largely unchanged from last quarter but, Charteris said, there had been an upward movement at the other end of the scale.

 “We’d hoped to see the percentage of farmers assessing themselves as ‘unviable’ drop a bit lower. And the fact we’re still seeing this number at a stubbornly high 8% does reflect the really challenging environment primary producers have faced over the last couple of years.

“That aside, it was good to see an uptick in the percentage of farmers viewing their own businesses as ‘viable’ or ‘easily viable’, with this rising to 55% from 48% previously.”

Farm investment intentions also crept up from 14%-19% of farmers expecting investment to increase in the next 12 months, and 17% expected it to reduce.

Cristina Alvarado, commercial manager, data and insight at NZX.

New Zealand’s dairy industry started the 2024-25 season on a positive note, with July marking a production recovery after a slower June, though output remains on the lower side of the seasonal milk curve. 

Milk production for the month reached 27.4 million kilograms of milksolids, up 9.2% year on year (YoY) – the highest July on record, surpassing the five-year rolling average by 6.2%. In tonnage terms, production totalled 310,000 tonnes, an 8.4% YoY increase, reflecting a strong early-season performance despite the initial June dip. 

Peak production, typically occurring between September and November, is still ahead. 

According to our revised NZX milk production predictor, YoY increases of 3.7%, 1.8%, and 0.8% are expected for August, September, and October, respectively. However, weather patterns could affect pasture growth, leading to potential volatility in production levels.

Globally, dairy markets displayed mixed trends. United States milk production in July fell by -0.4% YoY, while Argentina and Uruguay saw sharper declines of -4.8% and -9.2%, respectively. Conversely, Australia reported a 1.6% YoY increase in July production, while Europe saw 1.3% growth in June.

Upcoming US and European production reports may reveal further constraints. In the US, ongoing avian flu cases, now confirmed to be spread to California dairy cattle, and a shortage of heifers are expected to weigh on production in the coming months. 

Similarly, European milk production, while recently positive, faces growing challenges, including adverse weather and disease outbreaks such as bluetongue and lungworm, which may affect output.

On the trade front, New Zealand dairy exports showed robust growth in July. Export volumes increased by 10.2% YoY, with values rising by 10.7%. Total export volumes reached 282,715 tonnes, driven by strong gains in skim milk powder (SMP), cheese, infant formula, and casein. SMP rebounded sharply, up 57% YoY, thanks to strong demand from China and other Asian markets. However, anhydrous milk fat (AMF) and butter exports saw declines in volume.

August’s Global Dairy Trade (GDT) auctions reflected this varied landscape. GDT Event 361 on August 6 saw a modest 0.5% rise in the index, driven by gains in whole milk powder (WMP) and AMF, while SMP prices continued to decline. 

The market bounced back strongly later during the next August auctions, with index growth in pulse and the GDT average index surging 5.5% at Event 362 on August 20 – marking the largest increase since March 2021. September’s first auction, Event 363, saw a slight -0.4% dip, with WMP prices easing by -2.5%, while SMP showed strength, rising 4.5% reaching US$2,753 per tonne, its fourth-highest average price in the past 12 months.

As the industry navigates these developments, stakeholders are encouraged to stay informed through events like the upcoming SGX-NZX Global Dairy Seminar, scheduled for October 7-9. This annual event offers a key platform for sharing insights and strategies in response to the evolving global dairy landscape. 

For more information or to register, click here.

Dairy farmers looking for insights to Global Dairy Trade prices and their effect on milk price forecasts are being offered a new report by those in the know and with figures at their fingertips.

It is the SGX-NZX Dairy Derivatives Pre-GDT Digest, published bi-monthly about 24 hours before each crucial GDT event.

The report provides a comprehensive analysis of key market elements with the aim of helping readers make informed decisions in the trade of milk and dairy derivatives, futures and options.

The Pre-GDT Digest covers futures prices, cross-commodity exchanges from SGX-NZX, EEX, and CME, along with a detailed view of NZX’s stream return forecast and volatility indicators. 

“This bi-monthly report can help readers with insights to assist in understanding the dairy futures market,” NZX Dairy Data and Insights team leader Cristina Alvarado said.

“We estimate that almost 25% of NZ’s milk production (at a farmer and processor level) is now utilising some form of price risk management tool but we are a long way behind the use by farmers of these tools in the United States and Europe.”

Alvarado’s team at NZX monitors all aspects of global dairy markets and their NZ implications, writing nine regular reports and custom reports on request.

Former Fonterra senior adviser Alvarado is the commercial manager for services and subscriptions, assisted by dairy analysts Rosalind Crickett and Lewis Hoggard.

Venezuelan-born Alvarado has a BA and LLB plus a Master’s in international business (Hons) from the University of Auckland.

From a rural background, Crickett graduated from the University of Waikato with a BMS in agribusiness and strategic management, and Hoggard graduated from Auckland with a BCom in finance and economics.

Their work timetables are calendar driven and dominated by the fortnightly GDT Trading Events and alternating Pulse auctions, including pre- and post-market reports, along with the cycle of daily, weekly, fortnightly and monthly reports (see below).

NZX has one-third ownership of the GDT platform with Fonterra and the European Energy Exchange (EEX).

About 30%, or more than 6000, NZX report users/subscribers are outside of NZ in more than 25 countries as market participants and observers seek information about our dominant dairy industry.

Farmers, processors, traders, brokers, buyers  and financial services subscribe to bundles of up to six regular reports, along with access to market data and historical information going back 25 years.

Dairy farmers may find most useful these six relevant reports: the Daily Dairy Update, Dairy Insight, Grain and Feed Insight, NZ Pasture Growth Index (PGI), Milk Production Predictor and the latest, Pre-GDT Digest.

The Milk Production Predictor goes back to farm level with the Farmgate Milk Price Calculator, updated two days after every GDT event, with a forecast view into the current season and the next.

Farmers can input their own figures to generate a personalised price forecast.

The PGI weekly reports regionally and nationally and the data is updated daily, with access to a forecasting tool on pasture growth expectations.

Farmers use Dairy Insight to understand the drivers of their milk price and forecasts for the coming seasons, and benchmark feed input costs.

The Grain & Feed Insight is a practical tool to assist in making profitable decisions as a buyer or seller of feed grains.

It has international and national prices and commentary on market trends.

Growers who are members of the Foundation for Arable Research (FAR) receive a subscription discount.

NZX has a group of farmers who are partners, receiving free or discounted subscriptions in return for regular conversations with NZX analysts to better understand regional differences in factors leading to production.

NZX holds seminars for farmers and other industry participants on the education of dairy derivatives as risk management tools, guiding but not providing financial advice.

It is also an organiser of the annual SGX-NZX Global Dairy Seminar, to be held this year, October 7 to 9 in Singapore.

It is the cornerstone event for the dairy industry to convene, share perspectives and stay informed on the latest market developments with international stakeholders across Asia, Oceania, Europe and the Americas.

The Dairy Trade Statistics reports provide insights into exports and import statistics of dairy commodity figures from Australia, the United States, European Union, Argentina and China. 

The NZX Dairy team has taken over the release of New Zealand’s national milk production, previously published by the Dairy Companies Association of NZ, which is available to the public on its website and by email distribution list upon request.

NZX Data and Insights also undertakes special surveys and reports on request, seeking to bring better understanding of topics such as a region’s milk production or dairy market country.

Alvarado said all new accounts have free trial periods and that customers can select to bundle different reports to suit their needs and budgets.

Free trial: NZX, New Zealand’s Exchange

Global Dairy Seminar: SGX-NZX Global Dairy Seminar 2024 – Singapore Exchange (SGX)

NZX Dairy Team Products

• Dairy Update: Incorporates the latest relevant news from local and global dairy markets. It includes daily, weekly, GDT forecast and GDT results reports.

• Pre-GDT Dairy Derivatives Digest: Bi-monthly report covers futures prices, cross-commodity exchanges, a view of NZX’s stream return forecast and volatility indicators to help readers make informed decisions in the trade of milk and dairy derivatives futures/options.

• Monthly Dairy Report: In-depth analysis on key factors influencing the dairy industry, both internationally and within NZ.

•  Global Dairy Snapshot: Weekly NZX survey prices for WMP, SMP, cheddar, butter, casein, and AMF. It also contains prices from across the globe.

• Dairy Trade Statistics: Monthly export data for the main dairy commodities for NZ, Australia, US, EU and Argentina. This subscription includes access to use of raw data.

• NZ Pasture Growth Index (PGI): Weekly report on this topic and access to the PGI tool.

• Milk Production Predictor:  This subscription includes access to the NZX Milk Price calculator.

• Dairy Insight: Weekly insights report that interprets what is happening in the global dairy commodity markets and what this will mean for farmgate milk prices here.

• Grain & Feed Insight: Bi-monthly report on independent commentary and analysis of prices and industry trends.

DairyNZ’s latest Econ Tracker shows a better-than-expected outlook for dairy farms this season thanks to improving financial conditions.

The outlook is in contrast to its previous forecast update in June, which predicted a challenging season due to high expenses, DairyNZ’s head of economics Mark Storey said.

“In the past few weeks, we have seen the combination of declining interest rates and improved farmgate milk prices, which creates a more favourable outlook for New Zealand dairy farmers.

“These changes are likely to provide dairy farmers with greater financial flexibility than initially projected for the 2024/25 season.”

Its updated forecast shows a national break-even forecast sitting at $8.09/kg MS while the forecast average payout received has increased to $8.84/ kg MS.

The break-even milk price is the milk sale price per kilogram of milksolids to cover a farm’s costs in a season, excluding capital expenditure and principal repaid on loans.

“We have seen farm working expenses increase slightly, driven by increases in key operational areas such as electricity, irrigation, wages, and repair and maintenance costs – although the reduction in interest and increase in farmgate milk price significantly outweigh these minor increases, improving the overall financial position of most farmers.”

DairyNZ’s latest Farmer Perceptions survey already showed most farmers feel confident in the financial sustainability of their business, with 60% feeling very confident, and only 10% feeling less confident.

The positive sentiment is also reflected in Rabobank’s latest farmer confidence survey, which found that confidence has risen strongly and is back at net positive levels for the first time since late 2021.

Completed in early September, the latest survey found the number of farmers expecting the performance of the broader agri economy to improve in the year ahead had doubled since last quarter to 30%, while the number expecting conditions to worsen had fallen to 27% from 40%. The remaining 41% of farmers expected conditions to stay the same.

Storey said after having experienced several seasons with tight profit margins, many farmers will continue to feel relief following these recent announcements on milk prices and interest rates, despite a slight cash deficit on average for dairy farms, which reflects that interest costs are still high.

Having experienced several seasons with tight profit margins, many farmers will continue to feel relief following these recent announcements on milk prices and interest rates, Storey said.

“Although, there is still a slight cash deficit on average for dairy farms which reflects that interest costs are still high.”

Farmers will need a payout at least in the high $8/kg MS range to break even, he said.

“The situation is good in terms of that the forecast is in that range. The situation is difficult in as much that you’ll need a very good payout price to be in a profitable position.”

The update showed a scenario that if the interest rate drops from 8.25% to 7.50% by December 2024, compared to dropping to 7.50% by March 2025, it would improve the cash position of the average farmer by $5675 for the current season, relative to the alternative (three months later) scenario.

“We see clearly that earlier rate cuts would result in greater cost savings and a stronger cash position, compared to reductions made later in the season.”

This scenario provides some insight into what interest rate cuts could mean for the remainder of the 2024/25 season but are not to be relied on, he said.

“The improved liquidity from improved interest rates and expected farmgate milk prices can be used to address deferred payments from the previous season, such as repair and maintenance costs, or to pay down short-term debts, ultimately contributing to a more stable and sustainable financial outlook.”

However, while these interest rate cuts will be welcomed, the impact of them will not be felt until the season after, he said.

The Econ Tracker will be updated again close to Christmas.

In Focus Podcast: Full Show | 13 September

The trading/finishing game has been red hot through late winter. In stark contrast breeding stock appear to be falling out of favour as trading and finishing taking preference. It’s not hard to see why, with the way the market has moved in recent months. The march of forestry has had a significant impact on breeding numbers in recent years. 

Breeding is a long game, raising the potential to miss heated market movements. But it remains a crucial cog in the wheel. Without breeding numbers, we will continue to fight for store stock, therefore pushing prices beyond sustainable levels. Unfortunately we are now playing catch up in terms of understanding just how many breeding stock units have disappeared.

Beef + Lamb NZ’s recent stock survey report indicated in the last five years a decline of 140,000 breeding cows. Expanding that to 10 years for sheep, and we have seen a decline of 5.4 million breeding ewes. This ultimately means lower calf and lamb crops every spring which flows through to less store stock and therefore lower production and exports. 

We have seen the ramifications of reduced stock numbers versus demand this year. Some will argue that lower stock numbers will naturally increase returns. Domestically maybe, but we are bordering on becoming a niche global player for lamb and barely holding on to a top-five spot for beef exporting. Our ability to influence global market prices is reducing as quickly as our breeding base. 

We only have to look at the growth of Australia’s livestock industry in recent years to understand we are quickly moving in opposite directions.

Australia’s sheep flock is currently at a 17-year high of 79m head, bolstered by significant growth in their breeding numbers, sitting at 49m –2024 will stand as the largest lamb slaughter year on record at 27.7m head. Even with some expected flock consolidation, lamb slaughter in 2025 and 2026 will be larger than the preceding 19 years.

A larger flock, coupled with advancements in productivity has placed Australian lamb producers in the box seat, meaning they are well positioned to capitalise on forecast global demand growth. It’s much the same for Australian beef. Although cattle numbers peaked in 2023, the cyclical nature of production means slaughter rates won’t peak until 2025. This means elevated production and exports in the short to medium term and once again the ability to capture any opportunities that arise.

More: Subscribe to AgriHQ Livestock reports to receive the full report. Key points discussed in the this week’s North Island report include: beef and lamb projections in New Zealand and key international markets such the UK, the US, Australia and Asia.

In Focus Podcast | A new strategy for advocacy

AGMARDT and KPMG have released a report that offers a new way of organising our advocacy networks. Common Ground assesses the positives and negatives of the advocacy groups we have now and sets out a strategy that could improve the collaboration and messaging emanating from the farming world. AGMARDT general manager Lee-Ann Marsh joins Bryan to discuss the report.

Three weeks into the Meeting the Market tour, here are my key take-home messages:

Getting our products noticed is incredibly tough. We may have the world’s best meat and dairy protein but getting the ear of the people who decide what to stock in their supermarket or serve in their restaurant is far from easy. Cabinet shelf for lamb in particular is microscopic and securing it means taking it off someone else.

Sustainability is the current catch-all word. It applies to greenhouse gas emissions, soil and water health, improving biodiversity and animal health.

The world’s food giants want our protein but they require sustainability standards to be met. They are reflecting the concerns of their consumers, government regulations, financiers and business owners. Sustainability is as fundamental part of their business as finance and production, and they require those who supply them to take it as seriously as they do.

Our customers acknowledge we have a low greenhouse gas emissions footprint. They want us to show what they call “continuous improvement”, shrinking our footprint further, and they want evidence that we are.

Big food companies are not abandoning us. They are investing billions of dollars improving the sustainability of their suppliers and are talking of paying premiums for those that meet desired standards.

The traditional supply contract is changing. Prices are still important, but talk is increasingly of partnership – having consistent, reliable suppliers who have shared values and standards.

Our competitors are becoming more competitive. Who would have thought McDonald’s would be taking beef from farmers in the Amazon? It is, because suppliers are willing to meet strict supply criteria showing they are improving not eroding the environment, all to have a seat at the McDonald’s table.

We can’t afford to ignore their messages. We have a ticket to play in the major leagues but if we let this slip through our fingers we will be exposed to lower-paying, uncertain, price-driven customers.

The European Union is ramping up its environmental rules and regulations, which will mean less domestic food production providing opportunities for NZ food exporters.

The EU’s deforestation requirement, where suppliers of products such as beef and its derivatives have to prove they did not cause deforestation, is likely to be delayed but not shelved.

We need more of an international perspective. NZ is very insular by virtue of our place on the globe, but we need to realise the values, expectations and understanding of our customers differ and if we want to sell products to them, it is we who need to change.

•Wallace is visiting seven countries in six weeks to report on market sentiment, a trip made possible with grants from Fonterra, Silver Fern Farms, Alliance, Beef + Lamb NZ, NZ Meat Industry Association and Rabobank.

Global population trends are looming as a challenge to the dairy industry.

Cyrille Filott, a consumer food global sector strategist with Rabobank in the Netherlands, pointed out that United Nations forecasts of a world population of close to 10 billion by 2050 are 20% more than now.

But it is where that population growth is occurring and where it is not that poses a challenge to the world’s dairy producers.

Most of the growth will occur in West and East Africa, while the population trend in New Zealand’s traditional dairy markets is flat or shrinking.

In the next 25 years China’s population is forecast to fall 10% and to be significantly older than today, while the population in Europe and the Americas is forecast to be relatively stable.

The birth rate in many of our major markets such as China is below 1.5, much lower than the replacement rate of 2.2.

Filott told Farmers Weekly this will have a significant impact on demand for infant formula.

“It’s not a case of can we feed the world, I think we can, but who do we feed and how?”

Processors such as Danone have identified this trend and are releasing products aimed at older people.

“If we think of the next generation, what do we need to prepare for? We are facing a very different problem but we have a very different opportunity.”

More: Wallace is visiting seven countries in six weeks to report on market sentiment, a trip made possible with grants from Fonterra, Silver Fern Farms, Alliance, Beef + Lamb NZ, NZ Meat Industry Association and Rabobank.  Read more about his findings here.

In Focus Podcast | Methane busting in the Netherlands

Reporter Neal Wallace checks in from Amsterdam and tells Bryan about his visits to Wageningen University and to a Dutch dairy farm. He says the methane research going on there is promising and NZ farmers should be aware that emissions efficiencies are improving in the EU and other key food producing countries.

By Annette Scott and Gerald Piddock.

The earliest spring pasture flush in recent years across large parts of the country, coupled with rising processor schedules, has created the perfect storm for the store cattle market.

The sudden price spike in store values at saleyards, especially in the South Island, has been influenced by the autumn drought that brought good numbers of both prime and store cattle to the market, PGG Wrightson livestock manager Joe Higgins said.

“There’s also been minimal numbers of beef cross calves retained in the dairy industry and there’s no doubting the recent strengthening in the market has been fuelled by confidence from the surge of early spring pasture growth.”

Most processor schedules are $1.10-$1.25/kg stronger than a year ago, hovering around the $7 mark.

“This would be the best store beef prices I can recall for this time of the season.  

“There is positivity; farmers are sitting in pretty comfortable. The market has reached its pinnacle and holding. 

“I wouldn’t like to say whether it’s market or procurement driven, but the positivity is there so we’re good to run with that,” Higgins said.                 

Hazlett livestock manager Ed Marfell said the early spring pasture flush coupled with the large number of calves that went to the North Island earlier, clearing out the yearling stock numbers in the South Island, has impacted the market.

“A lot of calves left Canterbury with the autumn drought, and we have certainly felt the recent buying power of the North Island pushing exceptional prices across the board and above expectation.

“We have seen huge inquiry from the North Island for young stock and two-year cattle and once they cross the water they don’t come back to the mainland.

“These are not one-off sales, these hyped sales have been going for a month or so and while the market down here is strong, we are not at the level of the North.”

The agents said the margin would be reasonable for farmers selling prime stock at $7/kg and who have done their sums; they can afford to buy replacements, despite the inflated store market.

“Farmers want something to eat the grass and make money and if replacing killed prime stock it’s not a problem, it can be justified paying in the current store market.

“If not replacing sold prime stock, it could be more of a gamble for later on.”                        

According to NZX data, growth rates in Canterbury for the August–September period have been above average while the rest of the country is similar to previous years.

Waikato-based PGW agent Vaughan Larsen described the prices at the weekly cattle sale at Frankton as “ballistic”.

“In the last two months, there doesn’t seem to be anything holding it back. It’s a perfect storm for the store price.”

Heifers are selling at $4.55/kg LW, which equated to over $1000 for a 250kg animal, 430kg two-year heifers averaged $3.58/kg, up around $1/kg LW on 12 months ago.

It is not just store prices. The prime market remains strong and the price for manufacturing beef from cull cows is also high.

“It’s across the board, there doesn’t seem to be a hole in any of the markets.”

AgriHQ senior analyst Mel Croad noted in the latest Livestock Outlook report for September that farmgate beef prices for bull, prime and local trade are sitting at record highs for this time of the year. 

AgriHQ data shows that due to the lack of killable cattle through winter, prime and local trade prices have lifted by double their usual amount since June. 

“This boosted confidence and it’s clear there is a lot riding on the beef job to hold up through spring to ensure on-farm returns are met. 

“Although we have very strong prices now, the general trend is for slaughter prices to seasonally ease as we get closer to summer.

By how much will be determined by export demand and how quickly spring cattle supplies build, Croad said.

“We can’t overlook the fact that much of the recent upside has been driven by a lack of cattle rather than soaring export demand.” 

Anyone wired in to sell cattle during winter/spring has raked in record-breaking prices, whether that’s selling store or plugging finished stock into processing plants. Grass has clearly been a major factor, exaggerating processor shortages and in turn pushing schedules higher. This and an early “spring grass market” have sent store cattle silly too. 

But strong export returns from the United States have allowed processors to offer good money as well. The question is how much longer can we expect the US prices to stay afloat?

If we rewind a few months, back-to-back years of drought meant the US walked into 2024 with the smallest breeding herd since 1941. Combined cow and replacement heifer numbers dropped to 46.5 million, down 4.5 million from the start of the decade. 

Since bull farming is a rarity in the US (less than 2% of the total cattle kill), there’s a major reliance on cows to supply the lean grinding beef used in making beef patties. With the drought over, suddenly the number of cull cows arriving at the US processors fell sharply, creating major shortages and sending prices for fresh US lean grinding beef to all-time heights. 

However, there’s a second side to this story that’s slid under the radar – how much beef is being shipped to the US. It’s not surprising that Australia is funnelling much more beef into the US. Its herd is well and truly rebuilt and its cattle kill is flying at the quickest rate since the big droughts in 2018/2019. 

This is a major reason why frozen imported beef (that is, what Australia and New Zealand supply) has traded at a big discount to equivalent fresh beef from within the US, especially since not all US buyers are set up to use frozen beef.

But Brazil has been a bit of a wildcard. It was always going to cash in on the strong demand too – though it operates under a restrictive quota. Tariffs jump to 26.4% for any beef sold beyond this limit. Usually, this squeezes most of its US sales into the start of the year. However, with its main buyer, China, in a weak position, Brazil has kept sending boatloads of beef to the US even after the tariff-free quota was filled.

In total, US imports of frozen boneless beef from Australasia and South America through January-July were the highest since 2015, up 119,000 tonnes or 44% versus only a year earlier. The lift is even sharper when you include other cuts of beef.

When you map those US beef imports against their cow/bull production, suddenly there’s a 6.5% lift in manufacturing beef traded versus last year. Admittedly, total beef inventories in the US at the end of July were low compared to the past decade, but it shows that demand has been just as important as supply when it comes to driving prices higher.

And this is where it gets interesting. Over the past few weeks, the US imported beef prices have been strong, but with limited upside. Labor Day in the US (the first Monday of September) is the traditional marker for when demand for grinding beef starts to slow and cow production starts to lift. Whether the prices can hold with the current amount of beef on the market is debatable, yet we’ll have a lot more to sell into the US between now and Christmas as our cattle kill picks up steam.